Hospitality Feasibility: Where ADR Growth Can’t Outrun New Supply

New mid-rise urban hotel illustrating modern supply growth in U.S. hospitality markets

Introduction

In the post-pandemic recovery, U.S. hotels have seen average daily rate (ADR) and revenue per available room (RevPAR) climb to record highs even as occupancy lags. But in many markets, a surge of new hotel projects is threatening to erode these gains. Lenders and developers are closely watching feasibility metrics – from ADR growth and occupancy to debt service coverage – for red flags. This report uses two frameworks to dissect the issue:

• Underwriting Guardrails: Key metrics and thresholds (ADR, occupancy, RevPAR, DSCR, construction costs, loan sizing, etc.) that guide lenders and developers in evaluating hotel projects. What benchmarks do they set, and what triggers a yellow or red flag in a feasibility study?

• Market Flags: U.S. regions and metros – notably Texas, Florida, Tennessee and others – where the pipeline of new hotel supply threatens to outpace ADR or RevPAR growth. We highlight markets like Austin, Nashville, and Miami where feasibility is becoming fragile despite a macro recovery in travel demand.

Insights from the IBISWorld Extended Stay Hotels report are integrated to contrast the extended-stay segment with traditional hotels. We also include a comparison table of selected markets and their key feasibility metrics (pipeline vs. existing supply, recent ADR/RevPAR trends, etc.). Both lenders’ and developers’ perspectives are emphasized throughout.

Underwriting Guardrails for Hotel Feasibility

Underwriting a hotel involves balancing real estate fundamentals with operational risks. Hotels are unique among commercial properties – revenue resets nightly and operating costs are high – so lenders impose stricter guardrails. Below we outline the key metrics and typical thresholds that guide feasibility decisions, and what might raise caution flags:

ADR, Occupancy & RevPAR Benchmarks

• Market ADR and Occupancy: Feasibility studies start with local market performance. Analysts examine current ADR, occupancy rate, and RevPAR (which combines ADR * occupancy). Lenders prefer to see a project’s stabilized ADR in line with its competitive set and not reliant on unrealistic rate hikes. For example, nationally ADR rose ~1.6% year-over-year in early 2025 while occupancy was flat to down, yielding only ~1.2% RevPAR growth. If a pro forma assumes ADR growth far above inflation or region averages, that’s a red flag. Projects in markets still below pre-pandemic occupancy (many urban markets) warrant caution – rate gains alone may not be sustainable if new supply enters.

• “Breakeven” Occupancy: Underwriters often calculate the breakeven occupancy – the occupancy level at which net operating income just covers all expenses and debt service (DSCR = 1.0x). If a hotel’s breakeven occupancy is extremely high (e.g. 75-80% in a market averaging 65%), feasibility is questionable. Properties with more conservative breakeven points (e.g. 50-60% occupancy) have a cushion against demand dips. Extended-stay hotels often benefit here: their occupancy rates tend to run higher than traditional hotels (boosted by long-term guests like traveling nurses), and they can stay profitable even with lower turnover. This gives extended-stay projects a stability edge – during the pandemic, extended-stay hotels maintained above-average occupancy due to essential worker demand.

• RevPAR Penetration and Seasonality: Lenders compare the projected RevPAR index (property RevPAR relative to market) to ensure assumptions are realistic. A project claiming far above-market RevPAR without a strong competitive advantage (brand, location, unique product) will face scrutiny. Seasonal swings are also considered – e.g. a resort market hotel might hit 80% occupancy in peak season but 40% in off months. Feasibility models must show the project can service debt even in the slow seasons (often through rate management and cost controls).

Debt Service Coverage Ratio (DSCR) & Cash Flow Cushion

• Minimum DSCR Requirements: Debt Service Coverage Ratio (DSCR) – the ratio of net operating income to annual debt payments – is a critical metric. Most commercial banks set a minimum DSCR of around 1.25x, but for riskier property types like hotels the hurdle is higher. Hotels often require at least ~1.40x DSCR for loan approval. This means the hotel’s projected NOI should be 40% above the debt service. Lenders prefer even more cushion (1.5–2.0x DSCR) to withstand revenue volatility. If a feasibility study shows a DSCR under ~1.2x at stabilization, that’s a glaring red flag – the project would barely cover its debt even in good times. Developers may need to inject more equity or reduce debt to boost DSCR.

• Debt Yield: In recent years, lenders have shifted focus from loan-to-value toward debt yield, which is NOI/loan amount. For hotels, lenders typically seek a debt yield of 12%+ (meaning $1 of loan for every $0.12 of NOI). This ensures the property’s cash flow is strong relative to the debt burden. A low debt yield (e.g. under 10%) signals thin cash flow and will either trigger a lower loan size or higher interest rates. In 2024–2025, many lenders were effectively sizing loans by requiring ~13% debt yield on hotels. If a project can’t hit that, it may not get funded.

• Stress Testing Cash Flow: Both developers and lenders perform stress tests on the pro forma – e.g. what if occupancy falls 5% below projections or ADR growth stalls? They check how DSCR holds up in downturn scenarios. A feasibility “guardrail” might be that even under a moderate recession scenario, DSCR stays above 1.0x. If the cash flow turns negative with only a minor revenue dip, that’s a sign of an over-leveraged or over-optimistic deal. Many hotel lenders also require upfront interest reserves or faster amortization if they foresee DSCR dropping in early years.

Loan-to-Cost, Loan-to-Value, and Equity Requirements

• Leverage Ratios: Hotels generally command conservative leverage. Loan-to-value (LTV) ratios for stabilized hotel assets are typically around 60-65% in today’s market. For construction loans, loan-to-cost (LTC) might max out at ~70-75% if the sponsor is experienced. Lenders expect developers to have significant equity at stake – not only to improve DSCR, but to ensure the sponsor remains committed if things go south. If a developer is seeking, say, 85-90% financing of total project cost, most lenders will balk (red flag). Instead, a common guardrail is at least ~30-40% equity for new hotel developments.

• Funding Gaps and Mezzanine Debt: When senior loans won’t cover the full cost, sponsors sometimes use mezzanine debt or preferred equity. However, adding expensive mezz debt can squeeze DSCR and project returns. A fully layered capital stack (senior + mezz + minimal equity) raises risk – a warning sign in underwriting. Many senior lenders now require an intercreditor agreement if mezzanine financing is involved, and they scrutinize that total debt doesn’t push effective LTV too high. High combined leverage might trigger higher interest rates or even denial of financing.

Cost per Key and Construction Feasibility

• Construction Cost per Room: The cost per key to build the hotel is a fundamental feasibility input. If the development cost per room is too high relative to the rates the market can support, the project may never pencil out. Industry surveys show a wide range: the median U.S. hotel development cost is about $219,000 per room, but upscale urban projects often far exceed that. Luxury hotels now routinely exceed $1 million per key, and in some cases $2 million per key. Feasibility “napkin math” says a hotel costing $1M per key typically needs an ADR around $1,000 (assuming ~65% occupancy) to justify that expense. Few markets can achieve that – in the U.S., luxury ADRs are around $400 on average. Thus, ultra-high cost projects raise immediate red flags. As one hotel financier noted, operating costs for luxury properties require a RevPAR that “does not align with those development costs” in most cities. For more typical projects, sponsors will compare cost per key to local market values and income. If building a select-service hotel at $250k/key in a market where similar hotels sell for $150k/key, that’s a warning sign that the project’s economics might be upside down unless exceptional performance is achieved.

• Construction Inflation and Contingency: Lenders also look at whether the feasibility analysis has adequately accounted for cost inflation and overruns. Hotel construction costs spiked by 6-8% in 2022–2023. Though inflation cooled by 2024, it was still ~3-4% in early 2025. Underwriting will flag if the project budget has no contingency or assumes unrealistically low future cost increases. A contingency reserve (often 5-10% of project cost) is expected. If rising costs push the project’s required ADR beyond what the market can bear, the project may be paused or canceled. This happened often in 2020-2023: higher interest rates and construction costs “constrained new hotel openings [and] slowed supply growth” to near zero in 2023-24. Lenders shift focus to sponsoring developers with deep pockets who can absorb overruns.

Other Red/Yellow Flags in Feasibility

• Demand Projections vs. Supply Pipeline: A common guardrail is comparing the hotel’s forecasted demand growth to the market’s new supply pipeline. If a market is expecting a 15% increase in room supply but the feasibility assumes uninterrupted ADR and occupancy growth, that disconnect will be challenged. Many lenders will research third-party data (STR, CoStar, etc.) on the market’s pipeline. For instance, if an analyst notes “Market X has 10 new hotels opening (20% supply growth) in the next 2 years” – that might trigger a haircut to the underwritten occupancy/ADR for the proposed project. We explore specific markets in the next section, but suffice to say an oversupplied market is a major feasibility concern.

• Operating Expense Assumptions: Lenders also flag aggressive expense assumptions. Hotels have seen labor, insurance, and utility costs soar in 2024-2025. If a pro forma assumes very low expense growth or margins higher than industry norms, underwriters will be skeptical. Recent data show that hotel GOP margins have been compressing as “low single-digit ADR gains…trail general inflation,” pushing up operating costs. Thus, a feasibility study must show reasonable expense cushions; otherwise even decent ADR growth may not translate to the bottom line, endangering debt service.

• Brand and Segment Considerations: Lenders favor projects flagged by strong brands (Marriott, Hilton, etc.) and experienced operators. An independent hotel with a first-time owner is inherently riskier – often a yellow flag unless the location or concept is extraordinary. Hotel segment is another factor: full-service hotels, for example, have more volatile cash flows than extended-stay or limited-service hotels. Extended-stay properties, with their lean staffing and lower daily service, can operate more cost-efficiently and maintain steadier occupancy. This model attracted major investors (Blackstone, Starwood) to acquire brands like Extended Stay America and WoodSpring Suites. It also spurred a wave of new extended-stay brands and projects (Wyndham’s Echo Suites, Marriott’s Apartments by Bonvoy, etc.), meaning competition in that segment is heating up. Underwriters examining an extended-stay project will note that 38,000 extended-stay rooms were under construction as of mid-2025 – a sizable pipeline that could pressure rates. So while extended stays have favorable operating metrics, the feasibility must still account for new entrants driving “intensified competitive pricing” in some markets.

In summary, both lenders and developers use these guardrails to ensure a hotel’s projected cash flows can comfortably support its debt and that assumptions aren’t overly rosy. A feasible hotel deal in 2026 is one that can withstand rising costs, normalizing demand, and yes – new competitors down the street. Next, we turn to where those new competitors are cropping up the most, and how that impacts market-level feasibility.

Market Flags: Oversupply Risks in Key U.S. Regions

Even as U.S. hotel supply growth nationally has been modest (~1% in 2025), certain hotbed markets have a much more aggressive pipeline. In these markets, ADR and RevPAR growth – which buoyed recovery in 2021-2023 – are starting to falter under the weight of new rooms. We examine a few state and metro examples below, highlighting supply pipeline metrics and recent performance:

Texas – Booming Markets Testing Their Limits

Texas has led the nation in hotel development activity, with multiple cities in top pipeline rankings. According to Lodging Econometrics, Dallas had 193 projects (23,720 rooms) in its pipeline at the end of 2025 – the largest of any U.S. market. Austin was not far behind, among the top five with 120 projects (14,120 rooms) in the pipeline. This building boom comes after years of strong demand growth in Texas metros, but supply is catching up fast.

• Austin, TX: Austin epitomizes a high-growth market now waving a caution flag. Between 2019 and late 2023, Austin’s hotel room count jumped 26% – over 6,000 new rooms – yet ADR in 2023 was 19% higher than in 2019, and RevPAR was up 12% over that period. Those numbers suggest demand had outpaced supply for a time (helped by the city’s tech boom and events like F1 and SXSW). However, occupancy was still about 6% below 2019 levels in 2023, meaning the ADR gains masked an underlying softness. Now, another 40 hotels are set to open by 2027 in Austin, including many upscale projects. Industry observers wonder if the market can fill all these new rooms once the post-pandemic leisure surge normalizes. “The occupancy level will struggle to return to 2019 levels with that many rooms to fill,” noted one local developer. Indeed, Austin’s famed SXSW festival saw 2023 hotel occupancy at 77.6%, down from 86.5% in 2019 – a drop partly attributed to “a glut of hotel rooms” diluting the event demand. Feasibility Outlook: Lenders in Austin are becoming more conservative, requiring strong evidence of demand growth (e.g. major employers relocating or convention expansions) to justify new projects. Projects opening in 2025-2027 will face intense competition on rates, especially among the luxury and upper-upscale hotels that make up ~70% of Austin’s recent pipeline. Expect rate wars and occupancy pressure – a recipe for thinner margins.

• Dallas–Fort Worth, TX: The DFW metro is a corporate and convention powerhouse that has likewise seen robust construction. As of Q3 2025, about 4,600 rooms were under construction across 38 projects in DFW, with thousands more in planning. Notably, over 60% of Dallas’s active developments are in the upscale and luxury tiers, clustering in booming submarkets like Frisco and Uptown. Recent performance shows new supply is starting to outpace demand growth – a classic oversupply indicator. In the first half of 2025, occupancy in Dallas was down ~4% year-over-year even though ADR was up ~4%, resulting in essentially flat RevPAR. By Q3 2025, occupancy averaged around 63% with ADR ~$125, and operators had to “uphold rate integrity in a competitive supply environment”. Dallas still has major demand drivers on the horizon (the 2026 FIFA World Cup will boost room nights, for example), but the near-term reality is one of stable performance rather than growth. Feasibility Outlook: Lenders remain interested in Dallas deals – it’s a diversified economy – but they are stress-testing projects against the Metroplex’s sizable pipeline. With ~4–5% of existing inventory under construction and more coming, underwriting might assume lower occupancy or ADR in early years of a new project. Developers are trying to differentiate with premium brands and locations, yet from a lender’s view, Dallas is a “show me” market now: show me that your project can steal share without just cutting rate.

It’s worth noting that Texas’s pro-development environment (business-friendly climate, ample land, fewer regulatory hurdles) contributes to these pipeline surges. That contrasts with a state like California, where higher barriers to entry have kept new supply more in check. We address California separately, but first, another Sun Belt state facing supply indigestion: Florida.

Florida – Sun and Supply Shine (Too Much?)

Florida’s hotel industry thrived during the pandemic recovery as domestic leisure travel boomed. Markets like Miami, Tampa, and Orlando enjoyed record ADRs in 2021-2022. This success, however, spurred a wave of development proposals now hitting the market:

• Miami, FL: In Miami-Dade County, developers have nearly 99 hotel projects in the pipeline, totaling about 20,400 rooms – a 30% increase over the county’s existing hotel supply. Roughly 20 of those hotels (a mix of luxury high-rises in Miami Beach and upscale properties downtown) are already under construction. Miami’s reputation as a high-ADR market (it ranks near the top nationally for room rates and RevPAR) has given developers confidence to build. But demand has showed signs of softening from its peak. Miami’s tourism bureau noted late 2025 was still solid, but the frenzied growth of 2021-22 has cooled to a “new normal”. In fact, local analysts have voiced concern that such a huge pipeline – 30% of supply – coming by 2027 could tip Miami from undersupply to oversupply just as macro conditions tighten. The market is already facing softer demand in some months of 2024-25 (partly due to an easing of pent-up luxury leisure travel and a strong USD deterring some international tourists). Feasibility Outlook: Miami projects in planning now carry more risk than those greenlit in 2021. Lenders are carefully watching pre-sale absorption at condo-hotel projects and booking pace at new openings. The feasibility of another luxury resort hinges on continued rate premiums that might be hard to maintain once 20,000 new rooms enter. If there’s a U.S. poster child for “ADR growth can’t outrun new supply,” Miami might be it – by 2027 the market will either absorb the influx through robust demand (best case) or see occupancy/ADR backslide if the new hotels simply cannibalize each other.

• Orlando, FL: Orlando’s pipeline is also substantial (though not as extreme as Miami’s). As of 2023, the Orlando metro had ~130,000 existing rooms and around 3,000+ rooms under construction or planned for 2024-26. This equates to roughly 2-3% annual supply growth, slightly above the national average. Orlando benefits from relentless leisure demand (theme parks, conventions), and recent data showed ADR up about 6-7% in 2025 even as occupancy had some weekly declines. However, Orlando historically has had boom-bust cycles where overbuilding led to years of stagnant rates. Feasibility Outlook: In Orlando, the concern is less about if the rooms will eventually fill (they likely will on peak days) and more about at what rate. Developers must be cautious not to overestimate ADR growth once the newest resorts and themed hotels all compete with discounts in the off-season. Lenders will typically underwrite Orlando deals at conservative ADRs and require sponsors with strong liquidity, since the market’s fortunes can swing with tourism trends or hurricane seasons.

Nashville & the “Boomtown” Blues

Not all oversupply risks are in the big states. Nashville, Tennessee offers a cautionary tale of a mid-size metro that experienced explosive hotel growth. Nashville rode a wave of popularity in the 2010s, leading to a construction binge:

• Nashville, TN: From 2014 to 2024, Nashville’s hotel room inventory expanded from about 40,000 rooms to nearly 60,000 – a 50% increase in supply. This unprecedented growth finally caught up with the market. As of 2024-25, supply has been outpacing demand, and the cracks are showing in performance. Nashville entered 2025 on the heels of a challenging 2024 in which occupancy deceleration led hotels to cut rates. By Q3 2025, Nashville’s occupancy was down 2.8% year-over-year, ADR actually declined 1.4%, and RevPAR dropped 4.2%. In the words of one local report, this reflects “intensified competition” from new hotels, especially in the mid-scale segment. Over 500 rooms opened in Nashville in just one quarter, with 2,587 rooms still under construction (about 4.2% of existing supply – roughly double the national average). Many of these new rooms are in extended-stay and limited-service properties in suburban areas, as well as some luxury projects downtown. The influx of mid-tier hotels made it tougher for operators to maintain rate integrity, particularly on weekdays with softer business travel. Feasibility Outlook: Nashville’s feasibility alarm bells have gone from yellow to red. Lenders and investors are now scrutinizing Nashville deals very closely – some are pulling back unless the location or project is truly prime. Pro formas that assume steady ADR growth in Nashville are being reevaluated; more likely, underwriters will assume flat ADR or even slight declines until the market demand catches up. The silver lining is Nashville’s enduring appeal (leisure, conventions, sports events) and major infrastructure projects (a new $2.1B stadium, airport expansion) that could stimulate future visitation. But in the near term, any project that doesn’t significantly differentiate itself could struggle. Expect to see higher cap rates on Nashville hotel assets and lower appraisals, as the market works through its oversupply. Indeed, CoStar Analytics noted Nashville’s performance remained subdued into 2025 specifically because “supply continues to outpace demand growth”.

• Other Boomtowns: Nashville isn’t alone. Other mid-sized markets that enjoyed a post-COVID travel boom are seeing a flurry of development that bears watching. Phoenix, AZ is one – it leads the nation in hotels under construction (35 projects, ~4,800 rooms) as of late 2025, thanks in part to the recent Super Bowl and growing population. Atlanta, GA has the second-largest pipeline by project count (159 projects), as developers anticipate future corporate and convention demand. Even secondary cities like Charlotte, NC, Charleston, SC, and Nashville’s neighbor Memphis have numerous projects planned or underway. For each of these, the key question is: Will demand keep up? Many Sun Belt cities saw record ADRs in 2022-23 as people traveled in droves – but those one-time gains may not repeat annually. If a city’s employment and population growth remain robust, new hotels can be absorbed over time. However, if there’s an economic slowdown or travel fickleness, oversupply will quickly reveal itself in rate discounting. Feasibility studies in these markets now routinely include competitive pipeline analysis and often assume the new hotel will ramp up more slowly (lower early-year occupancy) given all the choices consumers will have.

California – High Barriers, But Caution Remains

California was mentioned as a key state to watch, although its dynamics differ from Texas or Florida. In California’s major cities, development hurdles (zoning, costs, community opposition) mean fewer new hotels get built. For example, Los Angeles has a sizable absolute pipeline (about 5,100 rooms under construction/planned as of Q4 2025) but that’s a drop in the bucket of LA’s total inventory. San Francisco has virtually no new full-service hotels underway (amid post-pandemic demand woes), and San Diego’s growth is moderate. One area of note is the Inland Empire (Southern California): this region (Riverside/San Bernardino) ranked among the top five markets in early-stage pipeline with 59 projects in planning. These are mostly economy and mid-scale hotels following housing and logistics growth in that area. It shows that even in California, if the conditions are right (cheaper land, growing population), a supply wave can form.

For California, the supply concern is less about sheer volume and more about timing and demand recovery. San Francisco, for instance, is still recovering from a steep RevPAR drop; even a handful of new hotels opening there in the next couple years could stall the fragile recovery of ADR. In Los Angeles, downtown hotels are warily eyeing the pipeline ahead of the 2028 Olympics – many projects are timed for that event, but if they all open around the same time, post-Olympics performance could slip. Feasibility Outlook: In California markets, lenders prioritize demand risk over supply risk (since supply is limited). Feasibility studies focus on whether business and group travel will rebound to fill existing rooms. However, any project that does move forward must prove it can capture demand from competitors; otherwise even a small oversupply can flatten ADR growth. Additionally, California hotels face high operating costs (wages, property taxes), so if ADR growth stagnates, margins erode quickly. The prudent assumption for California projects is often zero real ADR growth – if it works with that, it’s feasible. Counting on robust rate growth in California is a gamble given the slower post-pandemic recovery in some cities.

To crystalize the discussion, the table below compares selected markets on key feasibility metrics. It highlights the pipeline as a percentage of existing supply alongside recent ADR or RevPAR changes, illustrating where new supply pressure is highest relative to performance:

Market (State)	Hotel Rooms Pipeline	Pipeline % of Existing Supply	Recent ADR/RevPAR Trend
Austin, TX	~14,000 rooms in pipeline (120 projects)	~50% of current inventory (2019-2023 supply +26%)	ADR +19% vs 2019; occupancy still –6% vs 2019. RevPAR growth slowing as new upscale hotels open.
Dallas–Fort Worth, TX	~23,700 rooms in pipeline (193 projects)	~20–25% of inventory (DFW under construction ~4,600 rooms)	H1 2025: ADR +4.1% YoY, occupancy –4.3% YoY (flat RevPAR). New supply outpacing demand; operators holding rates steady.
Nashville, TN	~16,000 rooms in pipeline (120 projects); ~2,600 under construction	~26% of inventory (4.2% of supply under construction)	ADR –1.4% YoY and RevPAR –4.2% in Q3 2025. Occupancy down as 50% supply growth (2014–24) finally hits performance.
Miami, FL	~20,400 rooms in pipeline (98–99 hotels)	~30% of county supply	ADR among highest in US, but growth leveling off. 2025 “new normal” with solid but slower RevPAR gains. Oversupply concerns as demand softens from 2021 highs.
Phoenix, AZ	~16,300 rooms in pipeline (124 projects); 4,800 under construction	~20% of inventory (under construction ~5–7% of inventory)	ADR up mid-single digits in 2025 (boosted by events), but some occupancy volatility. Large pipeline aiming for future sports and population growth; risk of rate competition on shoulder nights.

Sources: Loan Analytic Database

Table Interpretation: Markets like Austin and Miami have pipeline rooms equal to an astonishing 30-50% of their current supply – meaning in a few years, room count could be half again as large as today. Austin managed to grow ADR sharply in recent years, but with supply growth outpacing even its population boom, that ADR growth is expected to stall. Miami’s pipeline (30%) is huge for a mature market; even though it currently enjoys high ADR, that rate premium may erode once new luxury hotels flood the market. Nashville and Dallas have slightly more moderate (though still high) pipeline ratios around 20-26%, but we see in Nashville that even ~50% supply growth over a decade has already pushed ADR negative year-over-year. Dallas so far shows flat RevPAR – essentially treading water – which is a warning sign given its continued building. Phoenix illustrates a Sun Belt metro betting on future demand (e.g. business relocations and tourism) to fill its new rooms; it has had decent ADR gains, but if any demand hiccup occurs, its 20% supply expansion will pressure pricing.

Conclusion

For hospitality investors, the lesson is clear: No amount of ADR growth can indefinitely outrun a torrent of new supply. In markets with double-digit percentage inventory expansion, the math of supply and demand eventually weighs on rates and occupancy. Lenders are already responding by tightening underwriting in oversupplied locales – requiring higher DSCRs, lower LTVs, and more conservative income projections. Developers, for their part, are becoming choosier with locations and segments, often pivoting to adaptive reuse or acquisition instead of new builds when the feasibility doesn’t pencil out.

Still, opportunities remain for well-conceived projects. The underwriting guardrails discussed (reasonable ADR/RevPAR assumptions, solid debt coverage, and prudent cost control) can indeed be met – especially by projects that differentiate themselves and deliver value that isn’t already in the market. Extended-stay hotels, for example, have shown a formula for resiliency (high occupancy, lean ops) that helped many survive recent downturns. But even that segment must beware over-saturation. In an environment where “subdued revenue growth” and rising expenses are squeezing margins, every new hotel must prove its feasibility beyond rosy projections.

Ultimately, hospitality is a cyclical industry. The current cycle has shifted from the post-2020 ADR surge toward a phase of normalization – and in some markets, a looming shakeout if too many hotels chase the same guests. Feasibility analysts and commercial lenders will continue to play the role of gatekeepers, using metrics and market intelligence to distinguish sustainable projects from those at risk of being the next cautionary tale. By adhering to strict underwriting guardrails and staying attuned to market flags, stakeholders can better ensure their hotel investments remain on the right side of the feasibility line, even when new supply crowds the field.

Sources:

• Loan Analytic Database

• Lodging Econometrics - Q4 2025 pipeline + brand conversions

• Lodging Econometrics - Southern markets drive pipeline growth

• Matthews - Nashville Hospitality Market Report Q3 2025

• Miami Today - Miami-Dade hotel pipeline